Frontier Group Holdings: Hold Rating Amid Demand Challenges and Uncertain Outlook

In a report released today, Ravi Shanker from Morgan Stanley maintained a Hold rating on Frontier Group Holdings (ULCC – Research Report), with a price target of $9.00.

Ravi Shanker has given his Hold rating due to a combination of factors affecting Frontier Group Holdings. The company’s first-quarter results and second-quarter guidance did not meet expectations, primarily due to a significant drop in demand in March and subsequent weakness in revenue per available seat mile (RASM). This has disrupted the company’s earlier optimistic outlook for achieving double-digit margins in the second half of the year.
Despite some positive signs of improvement in early May and anticipated capacity reductions in the second half, the stock is not expected to gain much credit in the short term. The potential for a network reset in 2024 could yield benefits in the future, but the risks remain high, and concrete evidence of earnings per share exceeding $1 may not be realized until 2026. Given these uncertainties, Shanker maintains a cautious stance with a Hold rating.

In another report released on May 5, UBS also maintained a Hold rating on the stock with a $3.50 price target.

Based on the recent corporate insider activity of 58 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of ULCC in relation to earlier this year.